Preschool Boosted, Per-Pupil Funding Increased in Education Budgets Signed by Governor

The final Fiscal Year 2015 budgets for School Aid and the Department of Education contain another $65 million increase for preschool programs for at-risk 4-year-olds, a small boost in the statutory minimum K-12 per-pupil foundation allowance and equity payments for districts and public school academies receiving the lowest state payments. Funding was also included to partially restore some educational and child care programs that were cut during the worst of the state’s decade long recession.

Despite small increases in the per-pupil allotment during the last several years, state payments to public schools and academies have failed to keep up with increased costs. Over the last decade, the minimum foundation allowance increased by 7.3%, while the Detroit Consumer Price Index increased by 19.4%.1

There are 48 Michigan school districts and public school academies operating with deficits, and many others warn that they will face financial distress if current funding trends continue. Minimum per-pupil payments peaked in Fiscal Year 2009 before being cut by a total of $470. With the increase in Fiscal Year 2015, minimum per-pupil payments will still fall below 2009 levels—without accounting for inflation.

Per-Pupil Foundation Allowance

Governor:

  • Includes $150 million for an increase in the foundation allowance of between $83 and $111 per pupil. Under the governor’s budget, the minimum per-pupil allowance would be $7,187, and the maximum guaranteed amount would be $8,132. Much of the cost of increasing the per-pupil payment next year is offset by the governor’s recommendation to shift funding for current equity payments to districts with lower foundation allowances ($36 million) to the foundation allowance, along with expected decreases in the number of students and increases in local taxable values.
  • Recommends continuation funding ($46.4 million) for districts based on their performance on four standards. Districts can currently receive up to $100 per pupil, including $30 per pupil for academic growth in math in grades 3-8, $30 per pupil for growth in reading in grades 3-8, and $40 per pupil for growth in all high school tested subjects. After release of the budget, the administration determined that full funding for eligible districts would require an additional $4.7 million for total funding of $51.1 million in Fiscal Year 2015.
  • Recommends continuation funding of $80 million for grants of up to $52 per pupil for districts that meet seven of eight best practices criteria by June 1, 2015.

House:

  • Includes $141 million to increase the per-pupil foundation allowance by between $56 and $112, with the minimum foundation allowance at $7,188 and the maximum guaranteed level (basic allowance) at $8,105. The House assumes that the expected changes in baseline costs projected by the governor—from a decline in the number of students, increases in local taxable values, and the transfer of funds from the current equity payment—would cover over $115 million of the total $141 million increase.
  • Includes new budget language reallocating up to $35 million from any funds that are determined by May 1, 2015 to be unspent due to declining enrollments to districts with at least 1.2% fewer students than the prior year, provided that the districts are not in deficit.
  • Increases funding for school district performance grants by 10% to reflect actual need, from the current level of $46.4 million to $51.1 million.
  • Reduces funding for district best practices grants by $1.3 million (1.6%) to a total of $78.7 million, and changes the best practices criteria. The House retains the requirement that districts act as policy holders for healthcare services benefits, competitively bid at least one noninstructional service, participate in schools of choice, and provide financial, achievement testing and other school data to the public through a dashboard. Deleted are criteria encouraging districts to measure student growth twice annually, provide dual enrollment and online learning opportunities, and offer physical education or health education. The House adds requirements related to school employee compensation and collective bargaining, and implementation of the Michigan Comprehensive Guidance and Counseling program.

Senate:

  • Increases the maximum (basic) per-pupil foundation allowance by $150, and the minimum by $300 per pupil. The increases are partially funded through the elimination of best practices grants to districts ($80 million) and performance grants ($46.4 million), as well as the distribution of $100 million in Michigan Public School Employees’ Retirement System (MPSERS) grants through the per-pupil allowance. Under the Senate budget, the minimum grant would be $7,376, and the maximum (basic) $8,199.
  • Includes $31 million for a minimum “hold harmless” increase for districts of $75 per pupil, reflecting the fact that the loss of best practices, performance and MPSERS grants will affect districts differently.
  • Agrees with the governor to roll $36 million in funding authorized in the current year budget for equity payments into the base funding for per-pupil payments.
  • Provides $32.4 million for a new Education Reserve Fund to pay for budget supplementals or other items in future budgets. Legislative action would be required to spend from the fund.

Final Budget:

  • Includes $177 million for increases in the K-12 per-pupil foundation allowance. Districts will receive a minimum of $50 per pupil, and those receiving less per pupil now could receive up to $125 per pupil from a new equity payment, for a total possible increase of $175 per pupil. The minimum payment in 2015 will be $7,251, with the basic allowance set at $8,099. The $50 minimum per-pupil increase fell significantly below the recommendations of the governor, as well as the House and Senate-passed bills.
  • Increases funding for school district performance grants by $4.7 million or 10% to a total of $51.1 million to reflect actual need based on student assessments. Criteria for receiving performance funding are not changed.
  • Reduces the amount of money school districts can receive for meeting best practices criteria from $52 to $50 per pupil, lowering overall funding from $80 million to $75 million. The final budget also adopts most of the changes in best practices recommended by the House, with two exceptions: (1) the final budget retains the current standard that districts provide online learning; and (2) a new standard is added to encourage districts to offer one credit of foreign language in grades K-8. To receive funding, districts must meet seven of the nine revised standards.

Funding and Intervention for School Districts in Fiscal Distress

Governor:

  • Proposes $10 million for a new fund for emergency grants to school districts in financial distress. The fund would be for districts that are either facing dissolution, or have accepted children from districts that have dissolved.
  • Revises the process for identifying and managing school districts facing deficits, including a requirement for immediate notification to the Michigan Department of Education, timelines for reporting and planning, guidelines for district or Intermediate School District financial recovery agreements with the State Treasurer, and authority for the Michigan Department of Education to withhold some or all state funding as an incentive to districts to eliminate deficits or develop acceptable deficit elimination plans.

House:

  • Agrees with the governor and appropriates $10 million for districts in fiscal distress.
  • Retains current law regarding the management of districts facing deficits.

Senate:

  • Rejects the governor’s proposed distressed school district emergency fund.
  • Agrees with the governor on changes in the management of districts facing deficits and requirements for enhanced deficit elimination plans.

Final Budget:

  • Appropriates $4 million for a new Distressed Districts Emergency Grant Fund—down from the governor’s and Senate’s recommendation of $10 million. Funds can be used by districts that are voluntarily dissolving, or those that receive students from a dissolved district.
  • Rejects the governor’s proposed changes in the process for identifying and managing school districts facing deficits. Under current law, which will be continued next year, districts or Intermediate School Districts that have deficits cannot receive payments until the Michigan Department of Education approves a deficit elimination plan that erases the deficit within two years.

At Risk Programs

Governor:

  • Recommends continuation funding of $309 million for the At Risk Program, which is available to school districts for a range of instructional and noninstructional services for at-risk students.
  • Proposes significant changes in the allocation and use of At Risk funds, including:

— Establishing two goals for the use of funds: (1) reading proficiency by the end of third grade; and (2) graduation rates, and career and college readiness. Districts that cannot show success toward those goals after three years must reallocate funds and revise their plans.

—  Allowing funds to be used to implement reforms in schools with 40% or more of pupils identified as at-risk—consistent with the local School Improvement Plan.

— Maintaining the current formula for distributing funds, which is based on the number of pupils qualifying for free or reduced meals, but redefining “at risk” students as those who meet any of the following criteria: (1) are enrolled in priority schools; (2) are enrolled in “focus schools” which are in the bottom 30% of achievement; or (3) did not achieve a proficient score on two or more state or locally administered assessments. In the absence of assessment data, the pupil must meet at least two of the following: (1) eligible for free- or reduced-price meals; (2) absent more than 10 school days during the year, or 10% of enrolled days; (3) homeless; (4) migrant; (5) English language learner; (6) immigrant; or (7) did not complete high school in four years and is still enrolled.

House:

  • Agrees with the governor and provides $309 million—continuation funding—for the At Risk Program.
  • Accepts the governor’s changes in the goals of the At Risk Program, including reading proficiency by the end of third grade, and assuring that high school graduates are career and college ready.
  • Accepts the governor’s new definition of an at-risk student.
  • Retains several current potential uses of At Risk funding, including early childhood programs, reading programs and adult education, and retains language prohibiting the use of funds to supplant other program funding.
  • Concurs with the governor in allowing At Risk funds to be used for school-wide reforms in schools where 40% or more of the students are at-risk.

Senate:

  • Agrees with the governor by providing continuation funding for the At Risk Program.
  • Rejects the governor’s proposed changes to the goals and allocation of At Risk dollars.
  • Rejects the governor’s changes in the definition of an at-risk pupil.
  • Rejects the governor’s proposal to allow districts to use the funds for school-wide reforms in high-risk schools.

Final Budget:

  • Provides continuation funding of $309 million for the At Risk Program, with the allocation of funding based on the current formula, which is 11.5% of each district’s foundation allowance times the number of pupils who qualify for free school meals.
  • Adopts the governor’s proposal that At Risk funds be used to ensure that third grade students are proficient in reading by the end of third grade, and that high school graduates are career and college ready.
  • Concurs with the governor to provide districts with greater flexibility by eliminating some specified uses of At Risk dollars, and by allowing districts to use At Risk funds for school-wide reforms consistent with their School Improvement Plans, if more than 40% of the students are at-risk.
  • Expands the definition of “at-risk pupil” to include both the governor’s proposed language and the definition in current law.
  • Adds new language that districts that do not have at least 50% of at-risk third graders reading at grade level, or have failed to show improvements over three years in the percentage of at-risk pupils who are college- and career-ready, must spend a share of half of their At Risk funds on either tutoring and third grade reading, or activities to improve college and career readiness.

Child and Adolescent Health Centers

Governor:

  • Recommends continuation funding of $3.56 million for child and adolescent health centers.

House:

  • Concurs with the governor.

Senate:

  • Concurs with the governor.

Final Budget:

  • Includes continuation funding of $3.56 million for child and adolescent health centers.

Hearing and Vision Screenings

Governor:

  • Recommends continuation funding for hearing and vision screenings at $5.2 million.

House:

  • Concurs with the governor.

Senate:

  • Concurs with the governor.

Final Budget:

  • Includes continuation funding of $5.2 million for hearing and vision screenings.

Early Childhood Education and Care

Governor:

  • Preschool Programs: The governor increases funding for the Great Start Readiness Program by another $65 million, after a $65 million increase in the current year—the largest dollar and service expansion in the United States. The governor’s proposal creates another 16,000 half-day slots for 4-year-olds, and brings total funding to $239.6 million in Fiscal Year 2015. The governor also:

— Increases the per-slot payment by $100, from $3,625 to $3,725.

— Includes budget language that allows Intermediate School Districts to enroll children from families with incomes of up to 300% of poverty if they can determine that all children at or below 250% of poverty are being served, and there is no waiting list. The highest-need children must be enrolled first. Homeless children, children in foster care, and those in special education inclusive preschool programs are eligible regardless of family income. Currently, Intermediate School Districts must ensure that 90% of the children in the program are from families earning 250% of poverty or less.

  • Early Childhood Block Grant: The governor provides continuation funding of $10.9 million for block grants to Intermediate School Districts for early childhood programs for children from birth through age 8. Funds are to be used in part to convene local Great Start Collaboratives and Parent Coalitions.
  • Child Care: The governor increases funding for child care subsidies for low-income families by $10.6 million (8%)—from $136.3 million to $146.9 million. New funds are to be used to:

— Increase the maximum allowable reimbursable hours for subsidized child care from 80 to 90 hours in a two-week period, recognizing parents need to travel to work and child care settings ($6.9 million). The increase in the number of reimbursable hours was adopted this fiscal year with the appropriation of $3.5 million in a supplemental budget bill.

— Increase reimbursement rates to higher quality child care providers, based on the state’s Great Start to Quality rating system. Providers with three, four and five star ratings would see progressively higher hourly reimbursements rates ($3.7 million). The tiered reimbursement system was also adopted in the current fiscal year with the appropriation of $1.8 million in a supplemental budget bill.

House:

  • Preschool Programs:

— Agrees with the governor and increases the Great Start Readiness Program by an additional $65 million. However, places $25 million of that increase in a GSRP reserve fund, making funding available to districts if sufficient slots are filled before Jan. 31, 2015 (a similar fund was created in the current year).

— Maintains the current requirement that at least 90% of the children enrolled in a GSRP are from families with incomes of 250% of poverty or less; but includes the new language making homeless children, or those in foster care or inclusive special education preschool settings, eligible regardless of family income.

— Rejects the governor’s recommendation to increase the per-slot grant by $100.

— Earmarks $10 million of total GSRP spending for reimbursements of up to $150 per slot for transportation costs.

— Adds budget language requiring Intermediate School Districts to report on their progress in contracting 30% of their GSRP funds to private agencies, and provides penalties for those that fail to demonstrate efforts to do so.

  • Early Childhood Block Grant:

— Concurs with the governor on funding for the Early Childhood Block Grant.

  • Child Care:

— Agrees with the governor by increasing funding for child care subsidies for low-income families by $10.6 million to a total of $146.9 million.

— Agrees with the governor to increase the maximum allowable reimbursable hours for subsidized child care from 80 to 90 hours in a two-week period.

— Agrees with the governor to increase reimbursement rates to higher quality child care providers, based on the state’s Great Start to Quality rating system.

Senate:

  • Preschool Programs:

— Agrees with the governor and increases the Great Start Readiness Program by an additional $65 million.

— Includes the governor’s budget language allowing Intermediate School Districts to enroll children from families with incomes of up to 300% of poverty if they can determine that all children at or below 250% of poverty are being served, and there is no waiting list. Also includes eligibility for homeless children, or children in foster care or preprimary special education regardless of income.

— Increases the per-slot grant by $50 to $3,675.

— Agrees with the House and earmarks $10 million of the total GSRP spending for reimbursements of up to $150 per-slot for transportation costs.

  • Early Childhood Block Grant:

— Concurs with the governor on funding for the Early Childhood Block Grant.

  • Child Care:

— Concurs with the governor and House on total child care subsidy funding of $146.9 million, including a $10.6 million increase to expand hours of care and create a tiered provider reimbursement payment system.

Final Budget:

  • Preschool Programs: For Fiscal Year 2015, an additional $65 million was approved for the Great Start Readiness Program, bringing total funding to $239.6 million. With these funds, an additional 16,000 half-day slots will be available for at-risk 4-year-olds. Because Michigan law allows districts to combine slots to create full-day programs, an estimated 10,000 new children could be enrolled. In addition, the final budget:

— Does not include the governor’s increase in the per-slot grant by $100 to $3,725.

— Allows $10 million (of the total funding) to be used for transportation costs of up to $150 per half-day slot.

— Establishes a $25 million reserve fund for GSRP, with funds made available for services for at-risk 4-year-olds if the slots can be filled and the Legislature approves the expenditure by Dec. 15, 2014.

— Includes the governor’s changes in eligibility, allowing children from families with incomes of up to 300% of poverty to be enrolled if Intermediate School Districts can demonstrate that all children at or below 250% of poverty are being served and there is no waiting list. The highest-need children must be enrolled first; and homeless children, children in foster care, and those in special education inclusive preschool programs are eligible regardless of family income.

— Includes House language requiring the Michigan Department of Education to reduce the number of preschool slots an Intermediate School District receives if it fails to submit evidence that it attempted to contract 30% of its total slots to community-based organizations. Timelines for quality assessments of community organizations through the state’s Great Start to Quality rating system are also established.

— Maintains language requiring Intermediate School Districts to establish a tuition sliding scale for the preschool program for families with incomes above 250% of poverty.

  • Early Childhood Block Grant:

— Includes continuation funding of $10.9 million for the early childhood block grant provided to Intermediate School Districts.

  • Child Care:

— Continues cuts in funding for subsidized child care, but increases funding for quality improvements and hours of care. The final budget includes $6.9 million to increase the maximum allowable reimbursable hours of subsidized child care from 80 hours to 90 hours in a two-week period, as well as $3.7 million to increase reimbursement rates to higher quality child care providers, based on the state’s Great Start to Quality rating system. Both changes were implemented through a supplemental budget bill this year. Michigan once provided child care for up to 100 hours in a two-week period, and many states have no caps if care is needed to work or train for jobs.

— Child care cases and costs are expected to continue to drop, with total funding for the child care subsidy program falling from $136.3 million to $110.3 million—a drop of 19% in just one year.

Bilingual Education

Governor:

  • Provides continuation funding of $1.2 million for bilingual education.
  • Removes current budget language prohibiting reimbursements to school districts that serve children who are not legal residents of the United States.

House:

  • Agrees with the governor to appropriate continuation funding for bilingual education.
  • Retains current budget language prohibiting payments for instruction for children who are not residing in the United States legally.

Senate:

  • Appropriates continuation funding for bilingual education.
  • Agrees with the House subcommittee to retain current budget language prohibiting payments for children who are not residing in the United States legally.

Final Budget:

  • Includes continuation funding of $1.2 million for bilingual education.
  • Includes the governor’s recommendation to remove current budget language prohibiting reimbursements to school districts that serve children who are not legal residents of the United States.

Adult Education

Governor:

  • Provides continuation funding of $22 million for adult education. Michigan has decreased state funding for adult education drastically in the past 20 years, from $185 million in 1996 to $22 million this year.
  • Proposes significant changes in the allocation method for adult education funds, including:

— Funds would be allocated to Intermediate School Districts serving as fiscal agents in each of the 10 “Prosperity Regions” identified by the Michigan Department of Education.

— In Fiscal Year 2015, 67% of the funds would be provided to Intermediate School Districts based on the proportion of total funding formerly received by the adult education providers in that region. The remaining funds (33%) would be divided based on new criteria that relate to the percentage of high school graduates and English language proficiency. By Fiscal Year 2017, all funds would be allocated based on the new formula.

House:

  • Agrees with the governor to provide continuation funding of $22 million for adult education.
  • Agrees with the governor to revise the adult education allocation method and formula.
  • Adds language prohibiting Intermediate School Districts from using the funds for administrative costs associated with serving as the fiscal agent.

Senate:

  • Agrees with the governor to provide continuation funding of $22 million for adult education.
  • Rejects the governor’s new allocation method and formula.

Final Budget:

  • Provides continuation funding of $22 million for adult education, down from $185 million in 1996.
  • Includes a new method for allocating adult education funds based on 10 “Prosperity Regions,” with Intermediate School Districts serving as fiscal agents. Funding through Prosperity Regions would be phased in, with all funds allocated through the new formula by Fiscal Year 2017. The new formula is based on criteria relating to the percentage of high school graduates and English language proficiency.
  • Allows Intermediate School Districts to retain up to 5% for administrative costs, which could reduce money going directly to programs by up to 5% in each Prosperity Region.
  • Requires the Michigan Department of Education to ensure that in Fiscal Year 2015, adult education services will be provided to at least as many persons as are served in the current fiscal year.
  • Provides up to $2,850 for each full-time adult education student, with providers receiving payments based 75% on enrollment and 25% on successful completion (currently 90% enrollment and 10% completion).

Dual Enrollment Incentives

Governor:

  • Includes $1.75 million for new incentives for school districts that support dual enrollment. Districts can receive up to $30 for each pupil enrolling in a course at an eligible postsecondary institution ($10 per credit hour), with an additional $30 provided if the pupil successfully completes the course and is awarded both high school and postsecondary credit.

House:

  • Concurs with the governor.

Senate:

  • Concurs with the governor, and makes concurrent enrollment programs eligible for funding.

Final Budget:

  • Includes $1.75 million recommended by the governor for new incentives for school districts offering dual enrollment.
  • Expands the incentives to concurrent enrollment programs.

Year-Around School Pilot Projects

Governor:

  • Includes $2 million for year-around school pilot projects in school districts that are eligible for the community eligibility option for free and reduced price lunches.

House:

  • Concurs with the governor to provide $2 million for year-around school pilot projects, but provides for a maximum award per district of $750,000.
  • Adds criteria for the selection of pilot districts.

Senate:

  • Concurs with the governor on funding, but limits any individual grant to $250,000.

Final Budget:

 Despite support by the governor, House and Senate in their 2015 budgets, the final budget does not include $2 million for year-around school pilot projects in school districts that are eligible for the community eligibility option for free and reduced price lunches.

Endnote:

  1. Jeffries, E., K-12 School Minimum Foundation Allowance, State Budget Overview, Senate Fiscal Agency (May 27, 2014).